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Being in the oil and gas exploration and production business comes with many inherent risks. The prices of oil and natural gas are prone to massive swings, as illustrated by Brent crude oil's movement from over $140 per barrel in the summer of 2008 down to below $40 by the end of that year. Hence, companies that have exposure to these volatile commodities must find a way to mitigate the risk of price fluctuations, especially in the current macroeconomic environment of tremendous uncertainty.

Most companies hedge their risks through derivative instruments like swaps and collars, often for years into the future. For instance, Linn Energy , one of the most conservatively hedged upstream companies out there, has hedged 100% of its expected oil production through 2016 and 100% of natural gas production through 2017.

Sometimes these hedges work in the company's favor and sometimes they don't. For instance, SandRidge Energy realized a total gain of nearly $194 million from its commodity derivative contracts in the three-month period ending in September of this year, while it suffered a $596 million loss in the same period last year.

Chesapeake Energy has been noticeably less conservative in its hedging strategy going into this year. Expecting a rebound in natural gas prices in the first half of the year, the company removed its hedges. Since that rebound never materialized, the company reported a larger than expected loss in the first quarter.

To take a closer look at commodity price and other risks facing Chesapeake, I created a premium research report on the beleaguered natural gas producer. Hopefully, the report will help investors get a better picture of the company's future. It includes opportunities, major risks, crucial areas to watch, and a closer look at the company's management.

The following is an excerpt from the report that addresses the biggest risks facing the company. It's just a short sample of one section, but I hope you find it useful.

RisksIn addition to the above factors, by far the biggest risk Chesapeake faces is a prolonged period of depressed commodity prices, especially natural gas prices. Even though the company is clearly gearing up for increased liquids production, natural gas still comprises 72% of its volumes of estimated proved reserves and 80% of its sales volumes. In addition, the company has tended to be lightly hedged in recent years, which exacerbates the impact of downward price movements.

The overarching theme sprouting from Chesapeake Energy is its indebtedness. If the company cannot shore up its balance sheet and is forced to cut its production schedule, then it runs the risk of losing some extremely valuable liquids-rich leaseholds. While Chesapeake has a bountiful amount of natural gas acres that are "held by production," the company still has plenty of drilling to do to turn its acres of liquids into permanent assets.

Interested in other opportunities and risks facing Chesapeake? That was just a sample of our new premium report on Chesapeake Energy. If you're debating whether the company is a buy or sell, the report may prove to be a crucial resource. In addition to an analysis of Chesapeake's risks, areas to watch, and its management, the report comes with complementary updates and delves into upside and downside catalysts looming on the horizon. To get started, simply click here now.